Many health care professionals enter into employment contracts which contain restrictive covenants. Restrictive covenants are contract provisions which specifically limit the type and location of employment that an individual may obtain if they leave their present employer. When a restrictive covenant is too broad or overreaching, courts may reject its validity. Courts will examine four factors in determining the enforceability of a restrictive covenant: the consideration exchanged between the parties, the time duration of the restrictive covenant, its geographic scope and the nature of the interest the employer is trying to protect.
If a restrictive covenant is included in an employment contract without the exchange of something of value (also called “consideration”), it will not be enforceable. This hurdle is often met when the employee accepts the job, as employment itself may be viewed as something of value. However, asking an employee to sign an employment contract containing a restrictive employment after they have already been hired (and which does not contain an increase in benefits or salary) may be problematic as the employee can argue that no consideration was exchanged at that time.
Enforceable restrictive covenants must be of reasonable length (typically no longer than two years) and geographic scope. Courts will look at each restrictive covenant on a case-by-case basis to determine the reasonableness of the geographic restrictions. For example, with respect to professional medical practices and physicians, the reasonableness of the geographic scope may depend on whether the practice was in a rural, suburban or inner city setting.
Parties seeking to enforce restrictive covenants must also demonstrate a legitimate interest that needs protection. In many professions, the investment of time, money and training that an employer invests in its employees may satisfy this requirement. Another legitimate interest that can be protected through the use of restrictive covenants is access to confidential information, which may include patient names and addresses, financial arrangements with vendors, and other trade secrets. Restrictive covenants may also be used to prevent physicians from entering into competitive relationships and agreements with the practice’s vendors or insurers, or from trying to hire away an employee of the practice.
Medical practices and physicians seeking to use restrictive covenants to protect their legitimate business interests should always consult with an experienced health care lawyer to assist them with the drafting of enforceable restrictive covenants which meet all of the requirements discussed above.
Philadelphia Health Care Lawyers at Michelman & Bricker, P.C. Protect the Interests of Physicians and Medical Practices in Pennsylvania and New Jersey
If you are a physician or a medical practice and need assistance with the drafting, enforcement or contesting of an agreement containing restrictive covenants, the dedicated Philadelphia health care lawyers at Michelman & Bricker, P.C. have the extensive knowledge needed to protect your interests. With offices conveniently located in Philadelphia, Pennsylvania, Cherry Hill, New Jersey, Longmeadow (Springfield), Massachusetts and San Juan, Puerto Rico, our seasoned health care lawyers handle all types of legal needs for professionals throughout the East Coast. Call Michelman & Bricker, P.C. today to schedule your free confidential consultation at (215) 557-9440 or submit an online inquiry form.